The Dealmakers Forum E-Newsletter, May 21, 2014 – REITs, Who Will be the Winning Bidder for Griffin-American Healthcare REIT II

Bringing You Senior Care M&A Deals and News

May 21, 2014 Issue: Seniors Housing Weekly Update: 60 Seconds with Steve Monroe Crowdfunding For Senior Care Development. A developer has reached their goal of $1.5 million of equity raised by crowdfunding, something that more people may try in the coming months…………. Read More

Recent Senior Care M&A Deals

Long-Term Care

Acquirer

Target

Price

Local owner/operator

Palm Gardens Assisted Living

$4.25 million

Regional owner/operator

Sunrise Village

$3.175 million

Deal of the Week Some of you may remember when skilled nursing facilities built in the early 1980s were considered to be relatively new. This was especially true when they were in the market for sale in the 1990s. But it is now 20 years later, and these facilities are 30 to 35 years old. But do not be fooled, there is still strong demand. In a recent sale of three skilled nursing facilities in northwest Indiana, five solid offers were made for the portfolio, and the marketing process took 30 days from start to contract. The three were built in 1977, 1983 and 1984 with a total of 389 beds, of which 16 were assisted living beds in one facility. A large private owner/operator in Illinois was the purchaser, and they paid $17.0 million, or $43,700 per bed and $154 per square foot. Chris Hyldahl of Blueprint Healthcare Real Estate Advisors represented the seller…………. Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Financing of the Week Although the non-traded REITs are getting much of the press these days, the smaller publicly traded REITs are ready to deal. Aviv REIT made this clear with a new $600 million credit facility which has an accordion feature which will allow the REIT to increase it to $800 million. That can fund a lot of acquisitions. This new unsecured revolving credit facility refinanced an existing $400 million “secured” facility, which provides Aviv with added flexibility. The new credit facility comes with a rate that ranges from 170 to 225 basis points over LIBOR depending on the company’s leverage, and a maturity date of May 2018, and that can be extended for an additional year as well. We can expect a very active Aviv in the acquisition market. Bank of America served as Administrative Agent……………Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Stat of the Week In talking with various financial intermediaries, the demand for higher-quality assisted living communities is almost insatiable. Properties built in the past 10 years, with high occupancies and preferably a mix of assisted living and memory care, are often bid up to levels above the asking price, if there even is an asking price. When it involves a portfolio, demand can be even greater. So in 2013, there was a significant difference between the average price per unit for what we call the “A” assisted living properties and the “B” properties. The segregation was based on age, size and location, and while subjective to a limited degree, we believe most “institutional” buyers would agree. Last year, the average price for primarily assisted living communities that were A quality was $222,400 per unit ($240,500 per unit in the two-year period of 2011-2012), compared with $134,900 per unit for the B properties ($111,600 per unit in 2011-2012). The average cap rate for the A properties was 7.3%, or 150 basis points lower than the 8.8% for the B properties. This is why so many owners of the A properties are deciding to sell before this current bull market cycle ends………….Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

Will it Happen? The rumors have been growing that American Realty Capital Healthcare Trust will be the winning bidder for Griffin-American Healthcare REIT II, in a deal that reportedly has been valued close to $3.7 billion. That would more than triple the size of ARC, which is rather shocking given that ARC just became publicly traded, and a few short years ago had less than $300 million in assets. We had thought Ventas would be the most likely winning bidder, partly because of its size and lower cost of capital, but also because of its experience in buying other health care REITs. Anything could happen, but if ARC wins the bid, we have to wonder at what premium?………….Want to read more news? Click here for a free trial to The SeniorCare Investor and download the current issue today

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